Bosnia and Hercegovina Croatia - iuj.ac.jp fileMay 16, 1997 Summary 2nd quarter 1997 Bosnia and...

COUNTRY REPORT

Bosnia and Hercegovina

Croatia

2nd quarter 1997

The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

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ISSN 1366-4123

Contents

3 Summary

Bosnia and Hercegovina (BiH)4 Political structure6 Outlook for 1997-988 Review8 The political scene

12 The economy

Croatia15 Political structure16 Economic structure17 Outlook for 1997-9819 Review19 The political scene24 Economic policy26 The economy28 Foreign trade and payments

29 Quarterly indicators and trade data

List of tables8 Bosnia and Hercegovina: forecast summary

13 Bosnia and Hercegovina: industrial output, 1996-9719 Croatia: forecast summary25 Croatia: interest rates27 Croatia: industrial indicators27 Croatia: labour market trends27 Croatia: prices and earnings29 Croatia: quarterly indicators of economic activity30 Croatia: foreign trade31 Croatia: foreign trade

List of figures8 Bosnia and Hercegovina: gross domestic product

19 Croatia: gross domestic product19 Croatia: consumer price inflation

1

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997

May 16, 1997 Summary

2nd quarter 1997

Bosnia and Hercegovina Outlook for 1997-98: The country is in a key phase for the setting up offunctioning state structures and the building of a basic economic frameworkfor sustained long-term growth. As the divergent interests of the three formerwarring parties continue to set back reintegration efforts, the internationalcommunity’s will to see through the implementation of the peace process isbeing tested. International pressure, in the form of a delay in organising futuredonor funding, risks setting back the reconstruction effort, which is the motorfor continued rapid economic growth from a very low base, especially in theMuslim-Croat federation.

Review: International pressure has brought some progress in setting up theinstitutions of a functioning state, notably an agreement in principle on theestablishment of a single currency and a central bank. Although relations inthe federation have remained tense, Zagreb is under international pressure towithdraw its support for hardline Croat elements in Bosnia. The RepublikaSrpska continues to obstruct real reintegration, and divisions within its leader-ship have arisen which in part reflect frustration over the alleged strangleholdof those in power over the economy.

Croatia Outlook for 1997-98: Franjo Tudjman is expected to win June’s presidentialelection comfortably, but uncertainty over his health will continue to fuelspeculation about the succession. However, the political uncertainty is unlikelyto produce a major departure from current economic policies. Inflation is likelyto quicken slightly, and a small currency depreciation may have beneficialeffects, especially given the widening trade deficit. Healthy growth is likely tocontinue, and economic restructuring will be stepped up.

The political scene: Success for the ruling Croatian Democratic Union inlocal and upper house elections has left the party and the president strength-ened, and the opposition in disarray. The elections in Eastern Slavonia,although flawed, were deemed fair. Croatia’s treatment of its Serb minority isunder considerable international scrutiny as the date for the full reintegrationof Eastern Slavonia approaches.

The economy: A three-year Extended Fund Facility agreed with the IMF hasset the government tough targets for continued financial discipline. A newprivatisation list has been announced as the government moves ahead withrestructuring. Banking-sector reform remains a particular challenge. A slighteasing in monetary policy has been accompanied by a small rise in inflation,fuelled in part by rapidly rising real wages. Industrial output growth is sluggish,although productivity has increased.

Editors:All queries:

Charles Jenkins; Peter Palmer Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

3


Bosnia and Hercegovina (BiH)

Political structure

Official names Bosnia and Hercegovina has legal existence within the boundaries of thehomonymous republic of former Yugoslavia. It comprises two entities: the Federationof Bosnia and Hercegovina, set up by the Washington Treaty of March 18, 1994, andthe Republika Srpska (RS)

Form of state Bosnia and Hercegovina has the following limited responsibilities under the BasicPrinciples agreed in Geneva and New York in September 1995, and confirmed atDayton, USA, on November 21: the establishment of a Constitutional Court, aCommission for Displaced Persons, a Human Rights Commission, a central bank,public corporations to manage and operate transport and telecommunications, aCommission to Preserve National Monuments, and a system of arbitration betweenthe two entities. Foreign trade is also supposed to be managed by the government ofBosnia and Hercegovina

Legislatures The federation and the RS have their own assemblies. Bosnia and Hercegovina has atwo-chamber parliament: the House of Representatives and the House of Peoples,two-thirds elected from the federation and one-third from the RS. A valid majorityrequires the support of at least one-third of the members representing each entity

National elections September 14, 1996; next elections due by end-1998

Head of state Bosnia and Hercegovina has a collective presidency of three, elected on September 14, 1996: Alija Izetbegovic, Momcilo Krajisnik and Kresimir Zubak

National government There is a small Council of Ministers with two co-chairmen (prime ministers) and adeputy prime minister chosen by the presidency on December 18, 1996. Threedepartmental ministers, each with two deputies, were elected by parliament onJanuary 3,1997

Main political parties Croatian Democratic Union of BiH (HDZ); Party of Democratic Action (SDA); Party forBiH; Serbian Democratic Party (SDS); Social Democrats of BiH; Union of BiH SocialDemocrats; Union for Peace and Progress

National government Co-chairmen Haris Silajdzic; Boro BosicDeputy prime minister Neven TomicCivil affairs & communications Spasoje AlbijanicEconomic relations & foreign trade Hasan MuratovicForeign affairs Jadranko Prlic

Federation President Vladimir SoljicVice-president Ejup GanicPrime minister Edhem BicakcicDeputy prime minister & finance Drago Bilandzija

Key ministers Agriculture & forestry Ahmed SmajicDefence Ante JelavicEducation, science & arts Fahrudin Rizvanbegovic Interior Mehmed ZilJustice Mato TadicEnergy, mining & industry Izudin Kapetanovic

4 Bosnia and Hercegovina (BiH)


Environment Ibrahim MorankicHealth Bozo LubicSocial affairs, refugees & displaced persons Rasim KadicTrade Mile Krezo Transport & communications Rasim Gacanovic

RS President Biljana PlavsicVice-president Dragoljub MirjanicPrime minister Gojko KlickovicDeputy prime ministers Velibor Ostojic;

Ostoja KremenovicDefence Milan Ninkovic

Central bank governor Serge Robert

Bosnia and Hercegovina (BiH) 5


Outlook for 1997-98

Creating functioning stateinstitutions is in a critical

phase

Further progress has been made in recent months in creating the institutionsof a functioning state. The country’s governing structures, at both state andfederation level, have been set up. However, making them work so that a basiclegislative and economic framework can be put in place will be a difficult task.Key laws on the budget, foreign debt and trade await approval by the Bosnia andHercegovina (BiH) parliament, and the establishment of a single currency and ofa central bank has been agreed in principle (see The political scene). However,the problems encountered in agreeing these and other measures in the QuickStart Package (see The political scene), as well as amendments to the federationconstitution, reveal the difficulty of reconciling the divergent interests of thethree former warring parties. Whether the choice of practical solutions, andtheir implementation, keeps up with the spirit of the peace agreement will haveimportant implications for the long-term survival of BiH as a unified state.

Disintegrative forcescontinue to counteract

reintegration efforts

So far, the implementation of the peace agreement has created a situation inwhich either final partition or reintegration remain possible. The agreement onspecial and parallel relations between the Bosnian Serbs and Yugoslavia (Serbiaand Montenegro), despite reassurances by the parties involved, has created aframework within which the Republika Srpska (RS) can be integrated into theneighbouring state’s economy and polity. While concessions have been madeby RS leaders on building joint state bodies, there is little evidence of real will forthe full reintegration of BiH, and plenty of opportunities remain for scupperingthe implementation even of agreed measures. The Bosnian Croats’ fierce resis-tance to the return of refugees to areas under their control and their insistenceon the creation of new Croat municipalities indicate that for them, too, the realreintegration of BiH is an outcome to be resisted. On the Bosnian Muslim side,the creation of an advisory council to the president, Alija Izetbegovic, consistingof ten leading Muslim intellectuals and politicians, was clearly aimed at securingnarrow Muslim interests, and may therefore also be seen as contributing todisintegrative trends in the country.

The internationalcommunity’s engagement

is critical—

The US defence secretary, William Cohen, has insisted that US troops will pullout in mid-1998, as foreseen by the mandate of the NATO stabilisation force(SFOR). SFOR’s presence is a crucial factor in ensuring the minimum securitynecessary for the rebuilding of the country. The prospect of the force’s with-drawal contributes to an overall feeling of uncertainty about the long-termprospects for the peace process. Without the international presence, the dangerof a return to war would be real. There are a number of potential flashpoints,including the disputed cities of Mostar and Brcko. The Muslims, in particular,are dissatisfied with the present status quo and are now in a much strongerposition to prosecute a war effectively than was the case before the Daytonpeace agreement. In the continued absence of progress towards real reinte-gration of the country, the tendency to concentrate on their own narrowinterests may be accentuated, and the temptation to try to increase their shareof the country through a return to war might increase. Given these dangers, itis unlikely that the foreign military presence will end entirely in 1998. Rather,there are likely to be efforts to find a new formula for US-EU cooperation.



—and it is adopting atougher approach

If the risk of a return to war in the longer term is to be minimised, and asituation brought about in which an international military presence is no longerrequired, a strong joint effort, involving the close engagement of internationalactors, would appear to be needed to achieve genuine progress in implementingthe peace agreement. The international community is stepping up the pressureon the local actors. In particular, the postponement of the next internationaldonors’ conference until progress is made on establishing a functioning legis-lative and economic framework for sustained recovery is serving to concentratethe minds of recalcitrant leaders in BiH on the need to take the necessary stepsto gain much-needed foreign funding. Pressure is also coming from the possibil-ity of a mass return of refugees from abroad, who would put added strain on thecountry’s resources. Germany in particular, which has over 300,000 Bosnianrefugees, has been shifting towards a policy of returning refugees to BiH as soonas possible. This possibility underlines the urgency of continuing with economicreconstruction and the implementation of other civilian aspects of the peaceagreement.

It is still uncertain whether assurances given to Mr Izetbegovic by the USpresident, Bill Clinton, in March that indicted war criminals will be arrested,will be translated into concrete actions. Also, it remains to be seen whether theefforts of the new international supervisor in Brcko to promote the return ofrefugees will be backed by greater will from the international community thanhas been apparent until now. Nevertheless, the increased international pres-sure for progress on implementing at least some aspects of the Dayton agree-ment is likely to bring further compliance by the local actors in somedirections. In particular, further progress in reaching agreement on the meas-ures contained in the Quick Start Package is likely, although there is consider-able room for further disagreement over matters such as the establishment of acentral bank and a single currency.

A delay of donor fundingrisks slowing the

reconstruction effort—

The earliest possible date for the international donors’ conference is now mid-June. The conference is important for several reasons. The reconstructionprogramme is the mainstay of current economic activity in BiH. The confer-ence is supposed to support the ongoing process of reconstruction and theconsolidation of the economic recovery. It is also intended to help the processof restructuring and of transition to a market economy. Progress in this sphereis crucial for the successful implementation of the other aspects of the peaceagreement, which need to be pursued simultaneously and interdependently ifthe ultimate goal of a self-sustaining economy and a stable peace are to beachieved.

—although the economicrecovery is set to continue

The modest economic recovery, particularly in the federation, is likely tocontinue and will be driven primarily by foreign assistance for the post-warreconstruction effort. The World Bank expects continued high levels of growthin the federation, albeit from a very low starting point. The outlook for the RSis much less clear. Its hitherto much lower growth rate, in comparison withthe federation, is expected to continue, although, if translated into action, theinternational community’s intention to channel more aid to the RS this yearmight produce an upturn. Some of the country’s industry, especially in the



federation, is slowly coming back to life, and trade is expanding. Imports areexpected to continue to grow as the recovery continues.

Growing signs of economic cooperation between the business communitiesacross the territorial divide, and with Bosnia’s neighbours, hold out particularhope. There is a growing awareness that international financial support forreconstruction constitutes only a fraction of the country’s needs, and that localfirms will have to fight for their survival. For many of them this is impossiblewithout cooperation within the region. The more the reconstruction effort isgeared towards recreating some degree of normality in society as a whole, themore likely it is that the process will achieve its ultimate aim.

Bosnia and Hercegovina: forecast summary

1995 1996 1997

Real GDP (% change year on year) 8a 40a 35b

Exports ($m) 14c 25d 50e

Imports ($m) 494c 520d 750e

a World Bank estimate. b EIU forecast. c BiH Chamber of the Economy estimate (federation only).d BiH Statistics Bureau estimate (federation only). e EIU forecast (federation only).

Review

The political scene

International pressuremounts for a functioning

state—

The international community has intensified pressure in recent months for theadoption of a set of measures dubbed the Quick Start Package. The measuresbeing pressed on the Council of Ministers (the central government) include: theestablishment of a joint central bank and a single currency; laws on the budget,foreign debt, customs and foreign trade policies, and foreign investment; theestablishment of a unified payments system; and the reintegration of power,transport and telecommunications systems.

The set of measures has two principal aims, one political and the other eco-nomic. Politically, they are seen as representing the minimum legislationnecessary to establish a functioning state, while economically they reflect theshift in the focus of international donors from reconstruction aid to pushingfor the reforms necessary for sustainable recovery (1st quarter 1997, page 11).The adoption of the measures has been made a condition for an IMF agreementand for the holding of the third international donors’ conference. The confer-ence has been put off three times, and the spokesman for the office of theinternational community’s High Representative in Bosnia and Hercegovina(BiH), Colum Murphy, said on May 1 that a new date will not be set untilsignificant progress in adopting the required measures has been made.

—but has brought onlylimited progress

The international pressure has brought some results. Laws on the foreign debtand on customs and foreign trade have been submitted to the BiH parliament,and on May 8, after months of haggling, the Council of Ministers adopteda state budget. According to Bosnia’s decentralised political system, most

0

10

20

30

40

50

1995(a) 96(a) 97(b)

Bosnia and Hercegovina: grossdomestic product% change, year on year

(a) World Bank estimates. (b) EIU forecast.Sources: EIU; World Bank.



government functions, including revenue collection, lie with the governmentsof the two entities of which the country is comprised. It is hoped that part ofthe central government budget will be met by international aid donations.This, too, will require a law to be approved by the BiH parliament.

Agreement on establishing a central bank and a single currency has provedextremely difficult. For a long time Bosnian Serb leaders insisted on having theirown currency and central bank. A compromise was reached, and the membersof the joint presidency agreed on April 15 to the setting up of a single currencyand a central bank. To appease the Bosnian Serbs, however, it was agreed thatthe currency will have different designs in the two entities. While the agreementin principle that there will be a single currency and central bank represents animportant step forward, much detail needs to be resolved before they can be putin place (see The economy). Indeed, this agreement, as with the law on thebudget, reflects the ambiguity of most solutions regarding the basic areas ofpolicy-making within the area of competence of the central government. Inprinciple, it is geared towards a unified country and economy, but whether, andhow, it is implemented, will determine its ultimate effect.

Relations between thefederation partners have

remained difficult—

The reintegration of the federation remains plagued by Muslim-Croat distrustand differences of aims (1st quarter 1997, page 11). The creation of newmunicipalities has been particularly contentious recently. There are 18 dividedmunicipalities, namely those which are partly in the Republika Srpska (RS). TheBosnian Croats are pressing for these municipalities to be reorganised so as tocreate new Croat municipalities as a basis for local elections scheduled forSeptember. This has heightened tension in Bosnian Croat and Muslim commu-nities across the federation. A number of unconstitutional referendums, havetaken place on both sides in an attempt to lay claim to disputed areas. Apartfrom adding to mutual distrust, this has also contributed to a deterioration inthe security situation in parts of the federation. There have been numerousattacks on religious buildings and clergy, culminating in the period precedingthe Pope’s visit to Sarajevo in mid-April.

A bill on new and split municipalities has yet to be adopted, as have draftamendments to the federation constitution regulating the status of Sarajevoand Mostar as self-governing units. Most of the decisions of the FederationForum, created to help resolve disagreements between the partners in thefederation, have not been implemented, and the functioning of the mixedcantons, particularly Hercegovina-Neretva, has been hampered by BosnianCroat obstruction.

—but progress has beenmade—

In some areas, however, there has been progress in promoting the functioningof federation institutions. A former federation defence minister, Vladimir Soljic(a Croat), was elected as the new federation president on March 18, replacingKresimir Zubak, who is now the Croat representative on the collective BiHpresidency. There will, however, be mixed feelings about the election ofMr Soljic, who is widely regarded as a hardline defender of Croat interests inBiH, and who was recently described in the Zagreb daily, Vjesnik, as having noillusions about an “integral Bosnia and Hercegovina”.



Meanwhile, after long negotiations, joint police forces in Mostar and Travnikhave been created, and a disagreement over the size and ethnic composition ofthe army seems to have been overcome. The 1997 federation budget has beenagreed, and the competencies of the cantons and the federation defined. Workon drafting laws on agriculture, forestry, the water supply, transport and com-munications is in progress. However, as at the republic level, the true test of thewill of the federation partners to cooperate will lie in the degree of implement-ation of these agreements. Up until now, numerous such agreements haveremained unimplemented.

—and Zagreb’s support forBosnian Croat hardliners

may have weakened

Following a number of attacks on the NATO stabilisation force (SFOR) inMostar in February (1st quarter 1997, page 11), Zagreb appears to have comeunder increased international pressure to rein in hardline Croat elements inBiH, particularly in western Hercegovina, which were blocking reintegrationmoves. Notably, at the end of February two powerful Mostar warlords, MladenNaletilic (known as Tuta) and Vinko Martinovic were arrested in Croatia, whileseveral other arrests were carried out by the Bosnian Croats. Meanwhile, thepolitical position of the hardline Hercegovina lobby in Croatia seems to havebeen weakened. It is unlikely that the president of Croatia, Franjo Tudjman,has acquired any real commitment to Bosnian integration, and the weakeningof the hardliners in Croatia is in response to a mixture of international pressureand internal Croatian political considerations, as moderates in the rulingCroatian Democratic Union have strengthened their grip on the party. Never-theless, any weakening of Zagreb’s support for hardline tendencies among theBosnian Croats, for whatever reason, could enhance the prospects for thesuccess of the federation.

RS efforts to assert itssovereignty have

continued—

Mixed signals have come from the RS leadership. On the one hand, it hasresponded to international pressure for progress on setting up functioningcentral institutions, such as the agreement on a central bank. On the otherhand, seeking to reassert its sovereignty, it has continued to usurp functionswhich, according to the Dayton peace agreement, should belong to the centralauthorities. In addition, it has shown little inclination to allow full reinte-gration, including freedom of movement and the return of refugees. Contraryto the requirements of the Dayton agreement, a foreign trade ministry wascreated recently and a delegation led by the RS prime minister, GojkoKlickovic, visited Washington in April for talks with the IMF and the WorldBank.

On February 28 an agreement on special and parallel ties between the RS andYugoslavia (Serbia and Montenegro) was signed by the Serb representative inthe collective presidency, Momcilo Krajisnik, on behalf of the RS, and by thepresident of Yugoslavia, Zoran Lilic. The agreement covers areas such aseconomic cooperation, regional security, border crossings and citizenship, thuscovering spheres which, according to Dayton and the Bosnian constitution,come strictly under the jurisdiction of BiH institutions. The agreement’s timingsuggests that one factor behind it may have been an attempt by the presidentof Serbia, Slobodan Milosevic, to reassert his nationalist credentials as heseeks support either for a new mandate as Serbian president or for a switch to



the federal Yugoslav presidency. Its long-term implications are thereforeunpredictable, but in the short term it has been seen as further damagingBosnian reintegration. The agreement was fiercely criticised by Muslim leaders.

—as tensions haveemerged in the RS

leadership

The agreement with Belgrade brought to the surface tensions between the RSpresident, Biljana Plavsic, and Mr Krajisnik. Mrs Plavsic’s main objection wasprobably that she, as president, should have signed the agreement, although shealso objected to a clause allowing for ratification of the agreement by the BiHparliament, which she saw as detracting from the RS’s sovereignty. But thedispute was part of a deeper split, amid speculation that Mrs Plavsic is deliber-ately being sidelined with the ultimate aim of removing her from office. Anattempt by Mrs Plavsic to institute an investigation of black-market activities,which, she complained, are stifling prospects for economic recovery in the RS(see The economy) was widely interpreted as a veiled attack on Mr Krajisnik andthe former RS president, Radovan Karadzic, who are allegedly involved in enter-prises which have made large profits from such activities. She has complainedthat the state-controlled media have attacked her, while frequently denying hera voice. The split may, in part, be seen as a continuation of divisions betweenpolitical leaders in Banja Luka, where Mrs Plavsic is based, and Pale, the villageoutside Sarajevo where Mr Krajisnik and most of the RS administration aresituated. In March two ministers based in Banja Luka were removed from office,further isolating Mrs Plavsic.

Mrs Plavsic replaced Mr Karadzic as president following international pressurefor the removal of the latter, who has been indicted by the international warcrimes tribunal in The Hague. Mr Krajisnik was always a more powerful figurethan Mrs Plavsic, and Mr Karadzic has retained considerable influence. Anyindication that Mrs Plavsic might undermine their positions would be unlikelyto be tolerated. There have been suggestions that she may be moving closer toRS opposition parties, as her position in the ruling party in the RS, the SerbianDemocratic Party (SDS), has weakened. Some opposition parties have movedfurther than the SDS in adapting to post-Dayton conditions. There are reportsthat the Socialist Party of the RS (sister party to the ruling party in Serbia, theSocialist Party of Serbia) may participate in the forthcoming local elections insome areas of the federation, while the leader of the Democratic Patriotic Blocof the RS, Predrag Radic, has spoken in favour of political links between partiesin the two entities. However, for the present, the SDS’s leading position lookssecure.

A settlement for Brckoremains elusive

The Brcko supervisor, Robert Farrand, opened his office on April 11. His role wasdefined following the postponement in February of arbitration on the town’slong-term future. His main tasks include ensuring freedom of movement andthe return of refugees, promoting economic recovery, the reconstruction ofBrcko’s port, customs controls and agreement with Yugoslavia on bordercrossings. The extent to which he will use his broad authority remains to beseen. Brcko’s strategic position, and the tensions which it arouses among theformer warring parties (Muslim and Serb leaders have threatened a return to warover it) make the fate of Mr Farrand’s mission a key test for the whole Daytonprocess.



Mr Farrand has declared his intention to tackle the most sensitive issue, thereturn of refugees. Indications are that he will face the same obstacles as havebeen experienced since Dayton. The World Bank is to invest $4m in Brcko,primarily in housing, with the aim of speeding up the return of refugees.The Serb authorities in Brcko have insisted that all returning refugees sign adeclaration of loyalty to the RS, and receive RS identity documents.

The local elections haveagain been postponed

Difficulties in organising local elections led the Organisation for Security andCooperation in Europe (OSCE) to postpone them in March for the third time,on this occasion until September 1997. The delay may allow an OSCE initiative,the 1997 Democratisation Programme, to get off the ground. Stressing thethemes of dialogue, confidence-building and reconciliation, the programme isaimed at improving inter-ethnic relations and at encouraging multi-ethnicity inpolitical and social life, including the media. It is targeting strategic socialgroups such as refugees and displaced persons, religious and political leaders,women, journalists and young people. It could be an important contribution tothe preparations for local elections, which will be decisive in determining thepolitical make-up of the country.

The economy

The reconstruction effortcontinues—

While the delay in holding the next donors’ conference risks slowing thereconstruction effort, activity will nevertheless continue this year on theprojects agreed so far. According to the World Bank, projects worth $1.15bn arecurrently being implemented. Of a total of 16, eight are joint projects for bothentities, including education, central heating, mines clearance, public works,local initiatives, primary health-care and emergency industrial recovery. Not-withstanding some improvement in the living conditions of the majorityof the population, and in the economic and social situation in general, thereconstruction task ahead is enormous. Some 90% of damaged housing stockremains unrepaired; at least 360,000 people in the country are displaced andwithout proper accommodation (with many still in collection centres); morethan 50% of the population is still dependent on humanitarian aid; andhealth-care and education facilities are inadequate. The physical infrastructureis slowly being repaired, but the resumption of road and railway traffic hasbeen partial and uneven.

A notable recent development was the agreement in April to establish a singlecurrency and a central bank (see The political scene). The four currencies now incirculation, namely the Bosnian dinar in Muslim-controlled areas, the Yugoslavdinar in Serb-controlled areas, the Croatian kuna in Croat- controlled areas andthe German mark, are to be replaced by an interim currency, the convertiblemark, until a permanent currency can be put in place. A currency board is to beintroduced, tied to the D-mark and with full foreign reserve backing. However,much remains to be agreed before the interim currency, let alone a more perma-nent arrangement, can be put in place.



—amid signs of a fragilerecovery in the

federation—

The economic revival recorded last year in the Muslim-Croat federation territoryhas continued in the first quarter of 1997. Starting from a very low base, andspurred by the reconstruction effort, the federation is experiencing very highlevels of GDP growth. According to the latest data from the federation’s statisticsbureau, industrial output in March was up by 33.8% compared with the 1996monthly average, and by 52.9% year on year. A recovery has also been reportedin trade, transport and tourism. Foreign trade continued to expand, with Croatiabeing the main trading partner. Imports from Croatia were ten times higherthan exports to Croatia in 1996; in the hope of redressing this imbalance, talksbetween the foreign trade ministers of the two countries were held in April 1997.

Bosnia and Hercegovina: industrial output, 1996-97

1996 1997Nov Dec Jan Feb Mar

Industrial output in the federation (% change year on year) 80.0 85.6 66.7 42.2 52.9Source: The statistics bureau of the BiH federation.

The employment situation remains difficult, as industry, the main employer,remains depressed. An estimated 650,000 people, of whom some 8% weredemobilised soldiers, were looking for jobs in the federation at the end ofMarch 1997. Job creation programmes are among this year’s priorities. Someencouragement may be found in reports that several of the country’s mostimportant industrial firms before the war, such as Energoinvest, and parts ofTuzla’s Soda-So, have resumed some of their activities and have even begunexporting. Delays in the reconstruction effort could have damaging conse-quences for these firms, as well as for the recovery of the industrial sector ingeneral. Failure to meet the conditions required for the holding of the nextdonors’ conference could thus result in recovery being set back. Differencespersist in economic performance across the federation, which are also reflectedin wages. In March 1997 the average monthly wage rose to DM240 ($140) inMuslim-controlled areas, and to DM328 in areas under Croat control. Despiteefforts to integrate the federation, it is still effectively divided into two separateeconomic, administrative and judicial entities.

—while the RepublikaSrpska stagnates

The RS is probably even more affected by the postponement of the donors’conference. The international community has this year declared its intention toshift towards investing more in the RS, but the failure to hold the conference hasstalled this process. The economy of the RS is facing collapse: production is at aminimal level, and many workers, including those in the public sector, have notbeen paid for months. When wages are paid, the average is estimated at onlysome DM70 per month. The refugee burden in the RS adds to fears of serioussocial unrest.

Mrs Plavsic has complained that the scale of black-market activities is deprivingthe state of tax revenue. In particular, two large companies which are allegedlyclosely linked to Mr Krajisnik and the Mr Karadzic are said to control keyimports such as fuel, cigarettes, alcohol and coffee. Mrs Plavsic tried to launchan investigation into the allegedly corrupt practices of such enterprises. TheRS authorities have shown some willingness to open trade links with the



federation, and some business links are being established. However, privatebusinesses complain that firms with powerful political connections are enjoyingmonopolies on trade in key goods, stifling economic development.

Inter-entity businesscooperation is increasing

The obstacles to economic recovery are not only related to wartime destructionand a lack of finance, but are also political in nature. This explains why, forexample, railway traffic has not resumed, although the system is technicallyready for operation. This has prompted members of the Forum of Businessmen,a body comprising representatives from both entities, to request that the entitygovernments open rail traffic throughout the country, something the inter-national community has so far failed to make them do. The reopening of railcommunications is essential for reviving the activities of a number of industrialenterprises, and would greatly facilitate the movement of goods and people.

The prime ministers of the two entities met for the second time at the end ofApril to discuss the possibility of initiating joint projects in the metallurgical,oil and food processing industries, which they could present to internationalfinancial institutions. The focus was on restarting the metallurgical industry,which would be in the interest of both entities, since the RS has the iron orewhereas the federation has the steelworks. Supporting this sort of initiative hasboth economic and political benefits, which the international communityhas recognised in its agenda for the third donors’ conference. The donor com-munity seems eager to embrace this principle even more widely in the periodto come.



Croatia

Political structure

Official name Republic of Croatia

Form of state Democratic republic

Legal system Based on constitution of December 1990, amended in 1992

National legislature There is a bicameral parliament (Sabor): the lower house is the Chamber ofConstituencies (Zastupnicki dom); the upper house is the Chamber of Regions(Zupanijski dom)

National elections August 1992 (presidential); October 1995 (Chamber of Constituencies) and April 1997(Chamber of Regions); next elections due by August 1997 (presidential), by end of1999 (Chamber of Constituencies) and by 2001 (Chamber of Regions)

Head of state President of the republic, currently Franjo Tudjman, last elected August 1992

National government Appointed by the president and confirmed by parliament. There is currently asingle-party (Croatian Democratic Union) government, appointed on November 7, 1995

Main political parties Croatian Democratic Union (HDZ); Croatian Social Liberal Party (HSLS); Croat PeasantParty (HSS); Social Democratic Party of Croatia (SDP; former communists); CroatianParty of Rights (HSP; neo-fascist); Independent Democratic Serb Party (SDSS); IstrianDemocratic Parliament (IDS)

Leading members of thegovernment

Prime minister Zlatko MatesaDeputy prime ministers Jure Radic; Mate Granic;

Borislav Skegro; Ivica Kostovic; Ljerka Mintas Hodak

Key ministers Agriculture & forestry Zlatko DominikovicCulture Bozo BiskupicDefence Gojko SusakDevelopment & reconstruction Jure RadicEcology, construction & housing Marko SiracEconomy (industry, shipbuilding & energy) Nenad PorgesEducation & sport Ljilja VokicFinance Bozo PrkaForeign affairs Mate GranicHealth Andrija HebrangImmigration & repatriation Marijan PetrovicInternal affairs Ivan PenicJustice & administration Miroslav SeparovicLabour & social welfare Joso SkareLocal government Davorin MlakarPrivatisation Milan KovacScience & technology Ivica KostovicTrade & tourism Niko BulicTransport, shipping & communications Zeljko Luzavec

Central bank governor Marko Skreb

Croatia 15


Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995 1996a

GDP at current prices $ bn 9.9 11.7 14.2 18.1 18.8

Real GDP growth % –11.1 –0.9 0.6 1.8 4.0

Retail price inflation (av) % 666 1,518 98 2.0 3.5b

Population m (mid-year) 4.78 4.78 4.78 4.80 4.80

Exports fob $ m 4,597 3,904 4,260 4,633 4,512b

Imports cif $ m 4,461 4,666 5,229 7,510 7,788b

Current account $ m 137 104 103 –1,712 –1,452

Total external debt $ m (Dec) 2,627c 2,523c 2,995c 3,662c 4,847

Government balance % of GDP –0.3 0.2 0.6 –0.9 –0.1b

Foreign exchange reserves $ m (Dec) 167 617 1,410 2,036 2,440b

Exchange rate CRD:$; HRK:$d 258 3,577 5.99 5.23 5.43b

May 16, 1997 HRK6.02:$1; HRK3.55:DM1

Origins of gross domestic product 1995e % of total

Agriculture, forestry & fishing 10.3

Manufacturing & mining 20.1

Construction 2.6

Trade, tourism & catering 19.2

Transport & communications 6.2

Crafts & others 41.5

Total 100.0

Principal exports 1996 % of total Principal imports 1996 % of total

Chemicals 15.1 Chemicals 12.9

Textiles products 14.5 Electrical equipment 10.4

Shipbuilding 9.0 Machinery & engineering 10.0

Food products 7.6 Petroleum products 9.5

Total incl others 100.0 Total incl others 100.0

Main destinations of exports 1996 % of total Main origins of imports 1996 % of total

Italy 21.0 Germany 20.6

Germany 18.6 Italy 18.2

Slovenia 13.5 Slovenia 9.9

Bosnia and Hercegovina 12.2 Austria 7.7

Austria 4.4 UK 2.9

Russia 2.9 USA 2.7

a EIU estimates. b Actual. c These figures do not include the $1.45bn Croatian share of unallocated debt inherited from former Yugoslavia. d OnMay 31, 1994, the kuna (HRK) was introduced, worth CRD1,000. The 1994-96 figures are HRK:$; previous years are CRD:$. e These figures havebeen substantially revised.

16 Croatia


Outlook for 1997-98

The president expectsvictory in June’s

presidential election—

Following the impressive performance of the ruling Croatian DemocraticUnion (HDZ) in April’s upper house and local elections (see The politicalscene), its position appears to be strong, despite many earlier predictions of adecline in popularity. The president, Franjo Tudjman, whose popularity isconsistently greater than that of the HDZ which is his party, is likely to wincomfortably in the presidential election scheduled for June 15.

—but considerablepolitical uncertainty

remains—

Nevertheless, the political outlook remains uncertain. In part, this relates tocontinuing doubts over Mr Tudjman’s longer-term health prospects, andwhether he will be able to remain at the helm for long. In addition, the countryappears to be going through a period of political flux as it adjusts to thepost-war situation. As speculation has continued about Mr Tudjman’s health,factions within the HDZ have been taking up positions, sometimes descendinginto open and bitter feuding.

The president appears to have opted for a decisive shift towards the moderate,technocratic, wing of the party (see The political scene), which he sought tobalance against the nationalistic right while the war was still in progress. Theright, although weakened, will continue to try to assert itself, with the strugglelikely to become more open if Mr Tudjman’s health deteriorates. With theformerly powerful defence minister, Gojko Susak, himself ill and weakened bymoves against his hardline associates in Hercegovina, the main standard-bearerfor the right is now the deputy president of parliament, Vladimir Seks. How-ever, as the moderates have been manoeuvred into key positions, particularlyin powerful extra-constitutional bodies in the presidential administration, theprospects for a hardline takeover of the HDZ, even if Mr Tudjman were to leavethe scene, look poor. Nevertheless, the likelihood that the intra-HDZ struggleswill continue as long as there are doubts about Mr Tudjman means that aperiod of political instability is possible.

—as the opposition isweakened by divisions

The opposition is in disarray following its disappointing showing in April’selections. As it appears unlikely that a challenger to Mr Tudjman in June’spresidential election will stand a chance, some possible candidates appearreluctant to stand at all. The Croatian Social Liberal Party (HSLS) is badly split,with some favouring moving closer to the HDZ (a local coalition has beenformed in Sibenik, and the HDZ has courted the HSLS in Zagreb) and othersfavouring cooperation with the post-communist Social Democratic Party(SDP). The HSLS leader, Vlado Gotovac, has tended towards cooperation withthe SDP, and might be the candidate best able to unite the opposition, but withlittle chance of success against the president. Mr Gotovac’s predecessor as partyleader, Drazen Budisa, may be biding his time, hoping to emerge as a candidateable to unite centre-right supporters of the HDZ, the HSLS and the CroatPeasant Party (HSS) after Mr Tudjman’s departure. The leader of the SDP,Zdravko Tomac, is popular in many larger cities, but the SDP’s communistroots limit his appeal.

Croatia 17


Eastern Slavonia’sreintegration is likely to

be difficult

The reintegration of Eastern Slavonia in July is likely to be painful, particularlyas returning Croats try to retake possession of homes presently occupied bySerbs from elsewhere in Croatia. It would be politically very problematic for theCroatian authorities to hinder such returns, even if they were so inclined.Nevertheless, the international spotlight will be on Croatia as the reintegrationproceeds, and it has been made plain by the EU and the USA that the treatmentof the Serbian minority is one of the yardsticks by which Croatia’s suitabilityfor integration into Western structures will be judged.

Little change is expectedin government economic

policy

Although the country faces a period of political uncertainty, the generaldirection of government economic policy is likely to be maintained for thepresent. The HDZ appears to be firmly in the grip of the party’s technocraticwing, and the main opposition parties, if they were either to come to power orto enter into coalition arrangements with the HDZ, could be expected to followthe same general line, perhaps with adjustments in the allocation of resources.So, despite a recent slight easing in monetary policy as part of a shift to a moregrowth-orientated stance, the maintenance of low inflation and a strong cur-rency, as well as following through with restructuring and privatisation policies,will continue.

The central bank mayrelax monetary policy—

The National Bank of Croatia (NBC, the central bank) may relax monetarypolicy a little by allowing a gradual reduction in reserve requirements from34.85% of kuna deposits in April to about 30% by the end of the year. However,the government has agreed tough inflation targets as part of its recent agree-ment with the IMF (see Economic policy), and prudence is likely to be main-tained. Inflation may, however, pick up slightly this year, as increasing realwages (which picked up significantly at the end of 1996 and the beginning of1997) feed through into increased consumption, but increased productivity islikely, in part, to compensate.

—and the currency mayweaken slightly

The recent slight weakening of the kuna against the D-mark represents a changeof trend, but it is too early to say whether it is significant. A moderate weakeningof the currency against other European currencies would probably be beneficialon balance, stimulating exports and the economy generally, while having onlya little effect on the still low rate of inflation. There is no indication that theNBC is contemplating a fundamental change in its policy.

The trade deficit is set towiden further

The rapid rise in real wages is likely to contribute to the trend whereby importsincrease faster than exports. The government has expressed itself not undulyworried by this development, arguing that in the circumstances of the post-warrecovery it is unsurprising, and there is some truth in its claim that the rise inimports is due partly to a healthy increase in investment. The current-accountdeficit is likely to remain high this year, but is expected to narrow in 1998, acontinued widening of the trade deficit notwithstanding, as the services andtourism sectors continue to recover.

Healthy growth is likelyto continue

The EIU expects growth to pick up. Despite the fragility of the upturn inindustrial output, the increase in real wages, coupled with the recovery oftourism, a key sector, give grounds for optimism that fairly rapid growth will

18 Croatia


continue in 1997 and 1998. Nevertheless, output will remain well below itspre-war level, and unemployment will remain high.

Croatia: forecast summary(% change year on year unless otherwise indicated)

1995a 1996b 1997c 1998c

Real GDP 1.8 4.0 5.0 6.0

Industrial production 0.3 3.1a 4.0 5.0

Retail prices (av) 2.0 3.5a 4.5 5.0

Current-account balance ($ m) –1,712 –1,452a –1,360 –1,250

a Actual. b EIU estimates. c EIU forecasts.

Review

The political scene

Mr Tudjman’s positionlooks strong—

The domestic political position of the president, Franjo Tudjman, and hisCroatian Democratic Union (HDZ) have strengthened considerably during thepast three months. The remission in Mr Tudjman’s health appears to havecontinued, following a period when it had not been clear how successful hisoperation for cancer in November 1996 had been.

—after an oppositionchallenge in local

elections—

The key event was the elections on April 13 for local and town councils and forcounty assemblies throughout Croatia, and also on the same day for the upperchamber of the national parliament, the Chamber of Regions. Before the elec-tions opinion polls had indicated widespread discontent, amid allegations thatthe governing party was taking care of the privileges of a political-business elitewhile the mass of the population was continuing to suffer from low wages anda depressed economy. There was some speculation that Mr Tudjman might befaced with a situation similar to that of the president of Serbia, SlobodanMilosevic, with a choice of either accepting opposition control of key cities orintervening to maintain the control of his own party but facing international

0

1

2

3

4

5

Mar . Sep . Mar . Sep . Mar

Croatia: consumer price inflation% change, year on year

Source: Croatian Statistical Office, Mjesecno Statisticko Izvjesce.

199519951995199519951995199519951995199519951995199519951995199519951995199519951995 9696 9797971995 961995 9696 9797971995 961995 961995 961995 961995 961995 961995 961995 961995 961995 96961995 96 97

0

1

2

3

4

5

6

1995 96(b) 97(c) 98(c)

Croatia

East Europe (a)

Croatia: gross domestic product% change, year on year

(a) Excluding former Soviet Union. (b) EIU estimates. (c) EIU forecasts.Source: EIU.

Croatia 19


denunciation for doing so. In 1996 he had, in fact, refused to allow the oppos-ition majority on the Zagreb city council to appoint the mayor.

—fails seriously to dentHDZ support

In the event, however, the results strongly reinforced the dominance of theHDZ in most areas. It won 41 seats out of a total of 63 in the upper house ofthe Sabor and won a majority in 18 out of 21 county assemblies, as well as mostsmaller local councils. In some of the larger towns, where it is less popular thanin the countryside, the HDZ failed to win an absolute majority. However, inmost cases divisions in the opposition and an electoral system which favoursthe leading party will ensure that the HDZ remains in control either on its ownor in alliance with fragments of the opposition.

The consolidation of theopposition has continued—

The elections saw a continued consolidation of the opposition, which mightenable it, in time, to become more effective. Of 45 parties which took part inthe elections, only four emerged with a significant number of seats, and ofthese one was the regional Istrian Democratic Parliament (IDS). The threemain, national, opposition parties are now the Croatian Social Liberal Party(HSLS), the Croat Peasant Party (HSS) and the Social Democratic Party (SDP).

—but the HSS and SDP aremutually antagonistic

The main obstacle to cooperation among opposition parties is antagonism be-tween the HSS and the SDP. Even in Zagreb, where seven opposition partiesformed a majority bloc together after the 1995 city elections and would haveappointed their own mayor had not the choice of a non-HDZ mayor beenvetoed repeatedly by Mr Tudjman, the HDZ improved its position, as a dis-united opposition failed to build on its 1995 performance. The HDZ won 24 outof 50 seats on the city council, although it achieved this with only 35.7% of thevote against 36.8% gained by an electoral alliance of the HSLS and the SDPwhich, because of the vagaries of the electoral system, won only 23 seats. Theother three seats were won by the HSS. However, the defection of two HSSdeputies to the HDZ in mid-May gave the HDZ an overall majority.

The HDZ was boosted bythe high profile of the

president—

The HDZ benefited from the high profile given to Mr Tudjman, whose photo-graph was prominently displayed in the party’s campaign literature and adver-tising. The opposition was divided, even in Zagreb, where it had managedduring 1996 to maintain a degree of unity. The most vigorous challenge waslaunched by the SDP, which, as in the cases of similar parties in Poland andHungary, derives from the former communists. It has transformed itself into asocial democratic party in the Western sense, and is committed to democracyand a market economy. It has sought to establish a profile as a champion of theinterests of those who have suffered hardship as a result of the war andeconomic transition. Mr Tudjman attacked the SDP, perhaps unfairly, buteffectively, (especially in conservative rural areas and small towns), as“Yugo-nostalgic”. The HSS joined the HDZ in attacks on the SDP’s communistroots.

—and a shift towards thepolitical centre—

The success of the HDZ may also have been helped by the selection of mainlycentrist candidates and by indications that Mr Tudjman has decided to take astrategic decision to shift the HDZ’s centre of gravity to the moderate centre

20 Croatia


and to reduce the power of more extremist elements. This shift was seen in thechoice of election candidates.

—helped by the arrest of amafia leader in Mostar

Equally important, although forced by outside circumstances, was the arrest inthe Hercegovina town of Mostar at the end of February of the leader of theparamilitary Croat mafia, Mladen Naletilic, who, until then, had protectionthrough political contacts in the HDZ. The killing of a Muslim from east Mostarand attacks on NATO troops (1st quarter 1997, page 11) had made action againsthim essential to restore the credibility of Croatia’s claim to support the imple-mentation of the Dayton peace process in Bosnia and Hercegovina (BiH). Thisdevelopment has reduced, at least temporarily, the influence of the powerfulHercegovina lobby in the HDZ in Zagreb.

Elections in EasternSlavonia were chaotic but

deemed fair—

Elections were held simultaneously in the formerly Serb-controlled area ofEastern Slavonia, which is currently under the control of a UN transitionaladministration (UNTAES) led by a US general, Jacques Klein. Eastern Slavoniais due to be fully incorporated into Croatia on July 15 of this year. Conditionswere reported to be chaotic on the day of the elections, April 13, with pollingstations not opening on time and ballot papers missing. However, polling wasextended to the following day, and the general outcome was considered by theUN administration as fair, although there were some complaints by both theSerb and Croat sides.

—and achieved a highSerb turnout—

The high participation of local Serbs, estimated at 85% of eligible voters, can betaken as indicating that at this stage the majority of those who lived in EasternSlavonia before the break-up of former Yugoslavia are willing to make an effort,despite considerable remaining anxieties, to live under Croatian rule. Althoughrefusing to discuss the possibility of allowing a single autonomous region inEastern Slavonia, the Croatian government has given a number of guaranteeson civil and minority rights (1st quarter 1997, pages 19-20) and appears to beprepared to allow dual citizenship with Yugoslavia (Serbia and Montenegro). Akey step in reassuring Eastern Slavonia’s Serbs was taken on March 18, whenCroatia, after much procrastination, produced a list of 150 Eastern SlavonianSerbs who were charged with, or suspected of, war crimes, with the implicationthat everyone else could be sure that, as a result of the amnesty law, they wouldnot face charges.

—encouraged by a newleader for the Serb party—

Another key factor in the relative success of the local polls was the election onMarch 10, by 19 votes to 14, of Vojislav Stanimirovic as leader of the newlycreated Independent Democratic Serb Party (SDSS) against the more hardlineGoran Hadzic. Mr Stanimirovic, who is well regarded by the UN administration,devoted considerable effort to encouraging the Serb population to obtain docu-ments as Croatian citizens in order to vote. Later in March the SDSS merged witha party representing Serbs in the rest of Croatia. Another Serb party, the SerbianNational Party (SNS), led by Milan Djukic, continues to exist, but is now likelyto be marginalised.

—but displaced Croats alsovoted in large numbers—

Those entitled to vote included not only the present inhabitants, most ofwhom are Serb, but also displaced Croats who intend to return. According to

Croatia 21


UN estimates, at the end of 1996 there were 145,000 people living in EasternSlavonia, of whom 50% were Serbs who had always lived there, 33% weredisplaced Serbs from other parts of Croatia, 6% were Croats and 5% wereHungarians (other estimates suggest that the number of displaced Serbs fromother parts of Croatia may be higher). Also according to UN figures, the totalnumber of voters in the elections for the area under UNTAES control was126,533, of whom 70,292 voted in the region and 56,241 in other parts ofCroatia. At the time of the 1991 census, the total population of the region was192,000, of whom 44% were Croats, 35% were Serbs and 7% were Hungarians.

—and won majorities inmany areas

The Croatian side, which was mainly represented by the HDZ, secured a major-ity in 15 out of 26 district councils, and in two towns, Vukovar and Ilok, of thethree being contested. The local Serbs won a majority in ten district councilsand one town, Beli Manastir. The HDZ won a majority in both of the twocounties into which Eastern Slavonia has been divided. The UN has encour-aged the HDZ and the SDSS to agree on coalition administrations in the towns.The HDZ cannot rule alone in Vukovar, and is faced with a choice betweencooperation with the SDSS or with a hardline Croat nationalist list. The HDZand the SDSS have reportedly been negotiating power-sharing agreements inVukovar and Beli Manastir. There would be an anomaly in purely Croatianadministrations running towns or areas where few Croats now live. Althoughthe return of displaced Croats is an accepted policy goal, the accomplishmentof this task without tensions with the present mainly Serb population wouldprobably be difficult if applied by purely Croatian administrations.

New homes for returningCroats may not avert

tensions

The Croatian government is planning a major reconstruction programme forthe area. It has set aside HRK850m ($141m) for the purpose, to which UNTAESwill add a further HRK250m. This is intended to provide accommodation for50,000 displaced people in 10,000 houses. However, the provision of newhousing may not be sufficient to alleviate tensions: many Croats may want toreturn to their old properties, which are inhabited by Serbs who have beendisplaced from other parts of Croatia. General Klein has agreed withMr Stanimirovic that Serbs cannot be expected to vacate such premises unlessconditions are created for them to return to their original homes in other partsof Croatia, which they were effectively forced to leave at the time of theCroatian military operations in 1995. Since many of these homes have beenburnt or otherwise destroyed by Croats, this would require another majorreconstruction effort.

Moreover, Croatia has recently been strongly criticised by a report of theUN secretary-general, by the Helsinki Human Rights Watch and by the USambassador in Zagreb, Peter Galbraith, for continuing human rights abuses inthe Krajina region. In early May General Klein visited the region and said thathe was “profoundly disturbed” by the degree of administrative obstructiontowards Serbs wishing to return to the region. The problem has recently beenacknowledged in Zagreb, with the ombudsman, Ante Klaric, describing thesituation regarding the security of citizens and property as unsatisfactory.

Relations with Yugoslaviamake little headway—

Moves to establish normal relations with Yugoslavia continue at a slow pace.Negotiations are in progress on frontier crossings, transit traffic, a consular

22 Croatia


convention, visas, reciprocal legal advice and, most crucially, dual citizenship,but progress is being held up by procedural questions. For example, on thefrontier issue, the Croatian side is demanding that the establishment of theborder checkpoints be settled first, while the Yugoslav side wants agreementfirst to be reached on the system of border controls and visas.

—and outstanding issuesremain between Croatia

and Slovenia

Despite an apparently constructive meeting on April 28 between the foreignministers of Croatia and Slovenia, Mate Granic and Zoran Thaler, there are stilla number of unresolved problems between the two countries. These includeCroatian savers’ deposits from before independence in Ljubljanska banka,which Slovenia has not yet honoured; the management of the jointly ownednuclear plant at Krsko in Slovenia; and Slovenian access to the Adriatic from itsport of Koper, through Piran bay. While Piran bay is of vital interest toSlovenia, Croatia is deeply concerned that new roads through Slovenia shouldbe linked with Croatia, which would benefit from improved links betweenMaribor, Zagreb and Rijeka; Trieste, Koper and Rijeka; and Salzburg, Ljubljana,Zagreb, Belgrade, Skopje and Salonika (the last of these being an EU-designatedcorridor). Croatia also wants Slovenia’s support for its objective of joining theCentral European Free Trade Agreement (CEFTA).

Central European identityis the driving force of

foreign policy—

EU and US attempts to stimulate Croatian participation in regional cooper-ation initiatives in the Balkans have provoked a vigorous counterattack byCroatian politicians and diplomats from Mr Tudjman downwards. They haverepeatedly emphasised their view that Croatia is a central European, not aBalkan, country. Nevertheless, Mr Granic has recognised that the achievementof this goal requires cooperation in the implementation of the Dayton peaceagreement for BiH and the peaceful reintegration of Eastern Slavonia. Ingeneral, Zagreb’s response to such regional initiatives has been to accept theprinciple of cooperation with Croatia’s neighbours, while being highly sensi-tive to any perception that it is being consigned to the Balkans.

—but the EU still viewsCroatia in the Balkan

context

Whatever the expectations of EU member states about the prospects for theirencouragement of a Balkan “regional approach”, Croatia is still viewed in aBalkan context by EU foreign ministries, which, on April 19, reaffirmed theregional strategy towards Albania, BiH, Croatia, Macedonia and Yugoslavia.The strategy stipulates that closer relations with Brussels will be dependent onthe countries meeting the following conditions: a credible programme for thereturn to their homes and to normal life for all refugees and exiles; recognitionof nationality rights for all who have been or are still residents of the respectivecountries; implementation of the Dayton agreement, including cooperationwith the international war crimes tribunal in The Hague; upholding ofcommonly accepted human rights standards; free and fair elections and respectfor the results; non-discrimination against minorities; freedom of the media;furtherance of economic reforms, notably privatisation and the removal ofprice controls; and cooperative relations with neighbouring states. There arefour conditions specific to Croatia, namely that: any agreement betweenCroatia and the Muslim-Croat federation of BiH must be in accordancewith Dayton (which runs alongside a similar condition regarding relationsbetween Yugoslavia and the Republika Srpska of BiH); that it should cooperate

Croatia 23


in building up the federation; that Croatia must exert pressure on Croats in BiHto dismantle the structures of the former Croat mini-state in BiH, Herceg-Bosna; and that Croatia must respect the Erdut agreement on Eastern Slavoniaand cooperate with the Organisation for Security and Coooperation in Europe(OSCE) and UNTAES in that region.

These conditions are likely to apply in negotiations on a trade and cooperationagreement with the EU. There have also been suggestions that the EU has askedCEFTA countries to slow down negotiations on the bilateral agreements withCroatia which are a precondition for Croatian membership of CEFTA, pendingCroatia’s fulfilment of conditions being set by the international community.

A new economy ministerhas been appointed

Having set out a new privatisation programme (see Economic policy), DavorStern resigned as economy minister in March and was replaced by NenadPorges, previously minister-counsellor in the Croatian embassy in Washington.Mr Stern has been appointed director-general of the country’s largest company,the petrochemical concern, INA, which is being prepared for privatisation.

Economic policy

A three-year agreementhas been reached with

the IMF—

The signing in March of a three-year agreement with the IMF in the form of anExtended Fund Facility (EFF), in place of the previous Systemic TransformationFacility (STF), commits the government to the continuation of its anti-inflationary policies initiated in October 1993. The IMF and the governmenthave agreed a number of policy targets, which include annual inflation (to bekept at 3-4%), the general government deficit (to be kept under 3% of GDP),and the current-account deficit (to be reduced to 4% of GDP, based on an 8%annual increase in exports, by 2000 compared with 6.5% in 1996). Theprogramme will also monitor, on a quarterly basis, government debt to thebanking system, the debt of 31 large public enterprises (which have beenexempted from the bankruptcy law and whose debt currently amounts to 10%of GDP) to the banks, foreign currency reserves and foreign debt. The EFFprovides for a loan of SDR353.16m ($486m), with a ten-year repayment periodfollowing a grace period of four and a half years.

The memorandum of understanding states that the current tax burden oncompanies is too high, especially from the point of view of foreign investors,and that corporation tax should therefore be lowered, with lost revenue madeup from the introduction of value-added tax (VAT) at the beginning of nextyear. The decision to postpone the introduction this year of VAT, to replace thecomplicated turnover tax, was much criticised. The delay was widely regardedas politically motivated, namely to avoid some tax rises on basic goods beforethe recent elections. However, the finance minister, Bozo Prka, has recentlystressed that VAT will be introduced next year. The memorandum also calls forthe top tariff rate to be reduced from 25% to 20%, but with the minimum 0-5%rate also abolished so that all tariffs are in the 8-20% range.

—which will help to funda moderate budget deficit

The government is planning for a central government budget deficit ofHRK2.8bn (2.6% of GDP), funded largely from foreign sources including theIMF facility and bond issues. HRK300bn was raised in two-year kuna bonds at

24 Croatia


the end of last year, with an interest rate of 12.5%. Early this year eurodollarbonds worth $300bn at 7% have been issued and D-mark bonds are planned forthe middle of the year. The deficit reached 1.3% in the first quarter of 1997alone, a quarter in which tax revenue is normally low.

A new privatisation listhas been announced

It is estimated that at present about half of GDP is produced by private com-panies, although this cannot be a precise figure in view of the undefined statusof many companies going through the process of privatisation and the manycompanies with large employee shareholdings which have not yet beenpaid for.

A list of about 800 companies, worth an estimated HRK16bn, due for privatis-ation was presented by the privatisation minister, Ivan Kovac, in March, andthen amended in April. Many of the shares will be sold through vouchers to350,000-400,000 citizens who had not benefited from earlier privatisations,including veterans of the recent conflicts and people injured or displaced bythem. The companies involved include food, shipping and hotel companies,and some larger concerns, such as a textile company, Varteks, whose foreignjeans licenser has indicated that it will not renew the licence unless the com-pany is privatised by June. Plans are also being prepared to privatise, wholly orin part, large companies like INA and utilities. However, there is concern thatutility privatisation should not lead to higher prices.

Interest rates have fallen alittle—

Since a tight monetary policy was introduced at the end of 1993 retail priceshave risen by only 11%, but the gradual return to normal economic conditionsand growing confidence in the domestic currency have allowed money supplyto expand several times. Thus M1 had increased by 240% to HRK10.7bn byFebruary 1997, and the broadest measure, M4, by 280% to HRK38.3bn. Dom-estic credit has, however, increased by a more moderate 76% to HRK34.8bn.Over the 12 months to February 1997, M1 rose by 28%, M4 by 45% and dom-estic credit by 4.5%.

Interest rates have fallen gradually, with average new short-term credits around17% in February compared with 26.3% a year earlier, although long-term rateswere little changed at around 14%. Time and savings deposits earned an averageof 9.8% compared with 15.2% a year earlier. In March the discount andLombard rates were reduced from 6.5% to 5.9% and 11% to 9.5% respectively,although these are not very important in monetary policy.

Croatia: interest rates(%; period averages unless otherwise indicated)

1995 1996 1997Mar Jun Sep Dec Mar Jun Sep Dec Feb

NBC Lombard ratea 18.0 18.9 22.3 25.5 27.7 27.1 11.0 11.0 11.0

Average loan rate: HRK 16.7 22.6 21.7 22.3 24.9 23.6 18.7 18.5 17.2HRK indexed to foreign currency 14.5 21.6 23.6 19.6 22.8 22.4 21.9 19.0 17.6

Average deposit rate: HRK 5.3 5.4 5.9 6.1 6.4 5.8 4.7 4.2 4.3HRK indexed to foreign currency 7.5 6.5 8.3 12.7 9.7 11.6 11.4 9.5 9.5

a Month-end.


Croatia 25


—and the currency hasweakened slightly

The currency strengthened from HRK3.80:DM1 and HRK6.56:$1 at the end of1993 to HRK3.56:DM1 and HRK5.54:$1 at the end of 1996, but by May 9 thisyear it had weakened to HRK3.63:DM1 and HRK6.15:$1. The weakening againstthe dollar is simply a result of the surge in the dollar in relation to all Europeancurrencies since the end of last year.

Much is still to be done inrestructuring the banks—

The restructuring of the banking system as a key element of the reform of thewhole economy has been discussed since 1994, but progress has been slow. Thegovernor of the National Bank of Croatia (NBC, the central bank), Marko Skreb,has said that, although the easing of monetary policies should help commercialbanks reduce lending rates, the banking system was not likely to be able to meetinvestment needs effectively. He listed low capital ratios, overstaffing and a lackof modern equipment as notable deficiencies.

—especially Privrednabanka

The condition of Privredna banka Zagreb (PBZ), one of the two largest Croatiancommercial banks, is particularly bad as a result of its heavy burden of non-performing debts, many of which are owed by companies which are, in theory,undergoing rehabilitation (1st quarter 1997, pages 21-22).

Zagrebacka banka is moreoptimistic

The other large bank, Zagrebacka banka, whose global depository receipts arelisted on Seaq International in London, is more confident and is aiming tomodernise its image by redesigning 150 branches, reducing staff, improvingclient relations and increasing the share of foreign investment in its capitalfrom 24% to around 32%. It is also likely to acquire some smaller banks and toprovide intermediary finance to others. Zagrebacka banka has agreed with thegovernment to make the equivalent of $60m available in loans at 9% interestto the small-scale private sector and new entrepreneurs.

The economy

Growth estimates for1996 vary

Estimates of 1996 GDP growth vary. While the IMF gives an estimate of 5%, therespected chief economist of Zagrebacka banka, Zarko Miljenovic, has reducedhis estimate to 3.7%. Preliminary unofficial data on the last quarter of 1996suggest that anticipated year-on-year growth in the quarter may have beenonly 4%, instead of the anticipated 5.5%. Earlier official estimates of 5-7% maytherefore have been overoptimistic. Much of the growth is accounted for byrecoveries in tourism and construction, both of which were severely disruptedby military activity in 1995, and the rate of self-sustaining growth is still veryweak. Industrial production increased by 3.1% last year compared with 1995,with an increase in productivity of 11% offset by a fall in the number ofemployees by 8%. Agricultural output rose a modest 2%, and remains wellbelow the level needed to feed the population, so that Croatia, a traditionalfood exporter, now has a food deficit.

The construction industryhas recovered—

There has been a considerable recovery in construction activity, with the num-ber of housing units completed in 1996 more than three times higher than the1995 figure, while the volume of new contracts increased by 53%. This reflectsa recovery from a year, 1995, which was severely affected by military conflict.Activity is still well below that preceding independence.

26 Croatia


—but industrialproduction growth slowed

in the first two months—

Industrial production growth has, however, been more sluggish. In the first twomonths of 1997 output grew by only 1.7% compared with the same months of1996, although there was a pick-up in March, when year-on-year growth of 5.5%was recorded. Retail sales in January and February grew by 32.3% on the samebasis, the increase being associated with a surge in imports (see Foreign tradeand payments).

Croatia: industrial indicators(% change, year on year)

1993 1994 1995 1996

Productivity 0.3 3.4 6.6 11.3

Employees –5.9 –5.6 –6.0 –7.4

Production –5.9 –2.7 0.3 3.1 Source: Croatian Statistical Office, Mjesecno Statisticko Izvjesce.

—and the number ofunemployed has

continued to rise

On the basis of previously used series, unemployment rose from 19.8% at theend of 1995 to 22% at the end of 1996. At the end of last year, however,the unemployment figures were revised to take account of employment inagriculture, the armed services and the police. Thus the rate in March 1997 wasgiven at 16.7%, although the number unemployed had increased by 20,000to 284,000.

Croatia: labour market trends(period averages)

1995 1996 1997Mar Jun Sep Dec Year Mar Jun Sep Dec Year Jan

Civilian employmenta (’000) 1,036 1,027 1,017 1,002 1,027 991 983 972 956 980 950

Unemployment rate (% of labour force) 19.0 18.5 19.1 19.8 19.0 21.0 20.5 21.2 22.0 21.0 22.4

Total unemployment (’000) 242 231 240 249 241 264 253 262 269 261 275

a Excluding individual farmers, the armed forces and the police.


Inflation has edged up alittle

Retail prices have been fairly stable during the first quarter of 1997. Producerprices fell by 0.7% in March, with a year-on-year increase of 2.2%. The mainfactor for inflation has been the increase in prices of services, which rose by8.7% in the year to April 1997.

Croatia: prices and earnings(% change, year on year)

1995 1996 1997Mar Jun Sep Dec Year Mar Jun Sep Dec Year Mar

Retail prices 0.4 2.6 2.9 3.7 2.0 3.3 4.1 3.1 3.5 3.5 3.9

Industrial producer prices 1.3 1.7 0.7 2.6 0.7 0.7 1.7 1.1 1.5 1.4 2.0a

Average real net wage 48.5 45.4 40.1 9.6 40.2 2.2 2.6 6.6 13.6 7.2 11.0a

a February.


Croatia 27


Foreign trade and payments

Exports begin to grow butimports rise faster—

The value of Croatian exports in 1996, at $4.5bn, was almost unchanged com-pared with 1992. The 10.5% growth in exports in the first quarter of this yearmust therefore be regarded as encouraging, particularly in view of the strength-ening of the dollar by over 10% against the D-mark, which implies that thegrowth in terms of European currencies was over 20%. However, during thesame period imports rose faster, by 22.8% in dollar terms, so the trade deficitwidened from $580m to $845m.

The fact that 69% of exports and 70.6% of imports are with the EU and theCEFTA, the latter including Slovenia as a new member, shows the heavydependence of Croatian trade on western and central Europe.

Increased directinvestment is sought

Croatia is looking to boost its inflow of foreign direct investment (FDI), esti-mated by the central bank at $350m in 1996, small by the standards of othertransition economies in central Europe. The best industry prospects are inshipbuilding, food-processing, telecommunications, tourism, utilities, and oiland gas exploration. The Croatian Investment Promotion Agency is hoping toattract a foreign company to a major tourism project at Babin Kuk, Dubrovnik,and has reported interest on the part of the Kuwait Investment Agency in theAdriatic oil pipeline and in shipbuilding. Visits by the prime minister, ZlatkoMatesa, to Malaysia and Indonesia were made with a view to promoting jointventures, including investments in Croatian industry and power generation.

Tourism earnings areexpected to rise

The tourism minister, Niko Bulic, expects tourism earnings to increase by about30% this year to over $2bn, from $1.6bn in 1996, although this would still beless than half of pre-independence earnings. Leading tour operators, like theUK’s Thompson and Germany’s TUI and Neckermann, have put Croatia ontheir 1997 brochures for the first time since independence.

Croatia’s foreign debtis $4.75bn

Foreign debt at the end of January was $4.75bn (of which $4.32bn was medium-and long-term), compared with $4.85bn at the end of December 1996. Officialdebt rose during 1996 from $3.66bn at the end of 1995, but this was mainlyowing to the bringing into effect of an agreement with the London Club ofcommercial banks to assume responsibility for a share of the unallocated out-standing debt of former Yugoslavia.

The central bank’s foreign exchange reserves were $2.17bn at the end of March,slightly down from $2.31bn at the end of 1996. In addition, it has specialdrawing rights worth $157m.

28 Croatia


Quarterly indicators and trade data

Croatia: quarterly indicators of economic activity

1994 1995 1996 1997

4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr

Industrial production Monthly av

General index 1995=100 107 100 101 95 104 100 102 101 109 103

Consumer goods “ 109 98 98 99 105 97 95 102 109 n/a

Employment

Employeda ’000 1,047 1,042 1,030 1,027 1,007 994 985 977 962 948b

Wages & prices

Net wages, real 1996=100 n/a 91.0 92.8 94.5 95.0 95.0 99.0 101.6 104.3 106.9b

Consumer pricesc: 1995=100 n/a 99 100 100 102 99c 100 100 102 103

change year on year % n/a n/a n/a n/a n/a 3.0 3.0 4.0 2.9 4.0

Producer prices, indc 1995=100 n/a 100 99 100 101 100c 100 100 101 102

Money End-Qtr

M1: HRK m 6,640 6,828 7,748 8,363 8,275 8,601 9,396 10,326 11,409 10,679d

change year on year % 118.9 n/a 52.9 28.8 24.6 26.0 21.3 23.5 37.9 n/a

Foreign trade Qtrly totals

Exports fob $ m 1,337 1,166 1,199 1,177 1,091 1,082 1,080 1,058 1,291 1,196

Imports cif ” 1,947 1,735 1,977 1,979 1,891 1,662 1,893 1,907 2,327 2,041

Exchange holdings End-Qtr

Foreign exchange $ m 1,405.0 1,535.2 1,826.1 1,943.8 1,895.2 1,890.8 2,019.1 2,295.1 2,314.0 2,178.5d

Exchange rate

Official rate HRK:$ 5.629 4.997 5.042 5.255 5.316 5.458 5.443 5.426 5.540 5.992

Note. Annual figures of most of the series shown above will be found in the Country Profile.a Excluding employees at internal and defence ministries and independent farmers. b Average for January-February. c From 1996, 1996=100.d End-February.

Sources: Republic of Croatia Central Bureau of Statistics, Monthly Statistical Report; IMF, International Financial Statistics.

Quarterly indicators and trade data 29


Croatia: foreign trade($ m)

Total Germany Italy Slovenia Austria

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec

Imports cif 1994 1995 1994 1995 1994 1995 1994 1995 1994 1995

Food 498.4 780.4 57.6 87.8 71.2 112.6 65.8 86.8 39.7 67.1

of which:

meat & preparations 75.8 114.4 9.4 2.4 3.2 8.0 15.9 20.3 5.2 10.6

fruit & vegetables & prods 131.4 222.0 4.0 6.9 33.0 58.8 10.9 15.3 8.0 18.2

coffee, cocoa, tea & spices 52.0 98.2 2.1 3.9 4.5 7.8 2.3 2.8 5.0 7.5

Mineral fuels 589.3 871.1 5.5 10.4 3.5 5.0 1.3 2.1 17.0 39.9

of which:

petroleum, crude 381.8 674.9a 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Chemicals 541.2 810.3 123.1 153.5 85.2 132.3 104.9 159.5 45.4 68.8

Paper & manufactures 134.2 235.6 17.2 30.4 21.8 37.5 45.0 70.9 18.8 34.1

Textile yarn, cloth & mnfrs 578.8 209.8 167.2 34.6 99.7 46.6 27.8 28.8 13.7 13.8

Non-metallic mineral mnfrs 76.6 123.7 9.9 15.5 31.0 53.0 14.0 20.6 5.8 9.9

Iron & steel 142.3 243.2 20.1 52.2 24.9 43.4 13.3 21.8 8.4 14.0

Non-ferrous metals 81.2 137.0 6.1 15.0 16.5 26.5 7.0 10.1 2.9 4.8

Metal manufactures 124.1 203.4 22.1 34.1 40.6 67.8 25.6 38.5 12.0 20.0

Machinery & transport eqpt 1,366.9 2,008.6 433.3 606.1 263.6 334.9 104.5 185.6 106.6 168.9

of which:

road vehicles 390.4 438.5 162.0 200.9 100.1 72.3 19.4 34.9 10.2 18.9

other transport equipment 39.0 122.6 7.9 15.6 5.0 15.0 1.0 4.2 6.6 11.2

Clothing 231.5 271.2 109.7 105.2 62.2 82.9 14.3 17.3 4.7 11.0

Footwear 201.5 214.4 42.1 50.6 94.0 94.2 18.6 15.6 32.5 31.7

Scientific instruments etc 111.5 159.0 30.2 52.3 15.0 22.4 9.6 11.8 10.4 16.7

Total incl others 5,229.1 7,509.2 1,109.8 1,509.0 994.6 1,366.0 540.9 804.8 352.7 574.1

Total Italy Germany Slovenia Austria

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec

Exports fob 1994 1995 1994 1995 1994 1995 1994 1995 1994 1995

Food 397.8 395.2 52.6 45.2 19.1 18.7 66.7 67.6 9.8 13.5

Wood & cork 143.8 160.9 89.6 103.2 5.2 3.7 18.7 16.3 12.8 19.3

Petroleum & products 343.5 366.1 93.8 116.1 6.7 1.3 107.1 124.8 10.4 17.3

Chemicals 543.2 813.6 144.2 299.7 46.7 83.5 87.5 138.2 8.4 14.4

Paper & manufactures 97.6 107.5 26.7 17.1 4.7 5.4 22.9 23.8 0.6 0.8

Textile yarn, cloth & mnfrs 129.2 123.8 46.1 38.1 28.4 27.5 9.9 10.5 10.8 1.9

Non-metallic mineral mnfrs 125.6 126.2 39.7 36.1 16.1 18.4 18.2 18.4 5.5 6.2

Base metals 119.9 132.4 27.8 28.6 22.0 25.8 14.2 13.8 4.2 1.9

Metal manufactures 80.5 92.5 12.1 11.3 14.7 19.9 12.7 14.2 5.8 8.3

Machinery & transport eqpt 731.7 777.6 43.7 82.0 107.7 150.8 49.4 62.2 21.5 25.3

Furniture 138.1 151.3 9.0 16.9 50.6 56.9 6.7 5.5 3.9 3.8

Clothing 629.0 672.9 69.6 110.5 434.5 422.1 20.8 17.5 3.7 15.7

Footwear 278.5 233.7 107.8 76.3 85.9 71.8 34.9 24.4 29.0 46.6

Total incl others 4,260.4 4,632.7 910.2 1,098.2 941.5 996.9 555.9 607.8 149.4 200.4

a Of which UK, 310.4.

Source: UN, External Trade Statistics, series D.

30 Quarterly indicators and trade data


Croatia: foreign trade($ m)

Exports fob Imports cif Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec

1994 1995 1996 1994 1995 1996

Manufactured food 324.0 320.2 344.3 330.6 499.7 502.7Petroleum & natural gas 22.3 38.0 46.1 476.7 708.6 742.2Petroleum products 337.0 350.2 352.7 50.5 57.7 68.9Chemicals 605.6 849.8 682.0 629.7 952.5 1,008.2Wood & manufactures 313.6 335.7 296.0 83.1 133.5 171.0Paper & manufactures 105.5 119.1 70.7 130.9 231.1 237.8Textile fibres & manufactures 734.1 785.1 732.1 369.0 463.4 471.6Metals & manufactures 240.5 269.7 255.9 417.5 691.4 737.7Machinery 156.3 166.1 170.1 447.0 665.8 775.1Electrical equipment 252.6 312.0 338.5 512.8 815.4 812.8Transport equipment 350.2 332.9 480.6 460.1 604.2 654.0 of which: ships 302.8 260.4 409.6 20.9 82.3 98.2Leather footwear & accessories 310.2 254.3 252.9 221.7 244.1 271.8Total incl others 4,260.4 4,632.7 4,511.8 5,229.3 7,509.9 7,787.9

Exports fob Imports cif

Jan-Dec Jan-Dec Jan-Dec Jan-Feb Jan-Feb Jan-Dec Jan-Dec Jan-Dec Jan-Feb Jan-Feb

1994 1995 1996 1996 1997 1994 1995 1996 1996 1997

EU 2,531 2,672 2,303 386 446 3,096 4,664 4,625 615 741

Austria 149 200 198 26 41 353 575 597 66 98

France 111 110 84 15 19 116 188 199 23 41

Germany 941 997 839 145 156 1,110 1,509 1,602 210 230

Italy 910 1,098 949 157 190 994 1,366 1,421 165 231

UK 68 57 70 10 12 179 455 225 64 33

EFTAa 65 59 41 8 6 112 219 179 23 30

Switzerland 60 52 37 7 5 101 169 144 21 25

Other developed countries 133 131 134 28 38 317 417 412 68 101

USA 88 83 89 13 29 172 201 213 29 40

Former Yugoslavia 968 1,061 1,219 165 255 572 850 866 110 132

Bosnia & Hercegovina 338 383 549 63 115 4 9 63 2 15

Slovenia 556 608 611 93 117 541 805 769 106 113

Former Soviet Union 176 185 172 19 23 254 224 253 45 80

Russia 146 152 131 15 19 148 157 214 43 73

East Europe 192 229 191 24 40 310 473 571 62 104

Czech Republic 34 36 40 4 10 92 147 207 18 35

Hungary 68 71 55 8 9 100 158 193 20 39

Total incl others 4,260 4,633 4,512 681 857 5,229 7,510 7,788 1,029 1,371

a Iceland, Liechtenstein, Norway and Switzerland.

Source: Republic of Croatia Central Bureau of Statistics, Monthly Statistical Report.

Quarterly indicators and trade data 31


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